Certainly hope not or some possible toast in the oven may get burned.
Well, if one did it they all did imho. Perfect time for NVEI to announce will be after the massive down draft to come in VZ SBC and BLS stock. I will take any of the three leaders in a buyout with paper. jmho
More Backpedaling From Qwest
By Cody Willard
Special to TheStreet.com
08/09/2002 03:24 PM EDT
Qwest (Q:NYSE - news - commentary - research - analysis) just can't seem to get things going in the right direction. By just about any metric, its second quarter was a disaster. Frankly, I was shocked by how bad the numbers were, including its $1 billion loss.
The remarkable disconnect between Thursday's reported numbers vs. those from previous quarters is probably yet another indicator of how badly the company was inflating its numbers in the past, as the company has recently announced that it will have to restate results for 2000 and 2001.
Such facts are rather obvious in its press release Thursday. The company even stated that "reported revenue for the quarter decreased 17.3% to $4.32 billion from $5.22 billion in the same period last year, primarily due to the absence of optical capacity asset sales and certain Internet Protocol (IP) equipment sales."
As readers of my newsletter have known for a long time, Qwest will probably have to come clean and admit that many of those optical capacity swaps and, more problematically, those IP equipment sales were wrongly accounted for. While I think the market has likely dealt with the capacity swaps, aggressive accounting of equipment exchanges may roil investor confidence in telecom once again.
Some of my industry sources say that companies ranging from IBM (IBM:NYSE - news - commentary - research - analysis) to Sonus (SONS:Nasdaq - news - commentary - research - analysis) to BellSouth (BLS:NYSE - news - commentary - research - analysis) will be implicated in the capacity, equipment and/or services swaps.
Any hint of participation in such transactions would probably be enough to slam a company's stock. If the revelations touch BellSouth, expect a sympathy decline for Verizon and SBC
When Qwest finally gets around to officially restating its numbers for 2000 and 2001, I think we can expect some WorldCom-type numbers -- perhaps several billion dollars in questionable reported revenue. It sure must have been nice to blow out of a quarter billion dollars worth of stock on the back of those numbers, like former CEO and "visionary" Joe Nacchio did. Maybe he'll lead a syndicate to buy Qwest out of bankruptcy. That would be poetic, no?
One of the beautiful things about telecom service providers is the fundamentally recurring revenue streams that they receive. While equipment vendors must continually hope for new network buildouts or increased demand for bandwidth or other upgrade-cycle catalysts, service providers can essentially sit back and collect a check every quarter.
To maintain steady revenue, service providers just have to keep from losing existing customers instead of constantly exerting the effort to sell new wares. Although all of the regional Bell operating companies are getting hit by recurring revenue drops and are finding it difficult to show any revenue growth, Qwest's quarter-over-quarter 6% decline will be brutal.
Qwest is a huge long shot to pull this thing off -- no matter what happens with its long-anticipated sale of the QwestDex telephone directory-publishing business or other assets.
I still think its stock might see a pop of a buck or two if the company can manage to sell QwestDex, but I'm becoming ever more convinced that the next chapter in its history will be 11.
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Cody Willard is a telecom and financial analyst/consultant. He is also founder of TelEconomics.com. Willard has co-managed $150 million in private investment funds and has headed up the research and analysis division of a venture development company. He has founded several telecom and technology companies and has managed the wholesale division of a $100 million CLEC. He also produces a premium product for TheStreet.com called The Telecom Connection. At time of publication, Willard was long SBC and Verizon, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Willard appreciates your feedback and invites you to send it to cody@teleconomics.com.
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